In the recent inflation report by the National Bureau of Statistics, Nigeria’s inflation rate dropped further for the second consecutive month to stand at 17.93% in May 2021 from 18.12% recorded in April 2021. The consumer price index, (CPI) which measures the inflation rate increased by 17.93% (year-on-year) in May 2021. This is 0.19% points lower than the rate recorded in April 2021 (18.12%).
Meanwhile, the closely followed food inflation index, which is felt first by the population, dropped from 22.72% recorded in April 2021 to 22.28% in May 2021, indicating the second consecutive decline in the food index.
The Lagos Chamber of Commerce and Industry (LCCI) disclosed that Nigeria’s inflation is a result of CBN’s deficit financing, which has increased significantly, and which is highly inflationary due to its profound effect on money supply growth. Other supply-side issues remain security situation, cost of transportation and logistics, energy costs, exchange rate depreciation, and illiquidity in the forex market.
Inflation, which is a benchmark index on the sustained prices of goods and services recorded for a period, can also be good for the economy. According to The Balance, “inflation is good” for the economy. When it’s mild, inflation has a healthy side effect. Once people start to expect inflation, they spend now rather than later because they know prices will be higher in the future. Consumer spending drives economic growth. The U.S Federal Reserve sets an inflation target. “It wants a healthy core inflation rate of 2%, which takes out the effect of food and energy prices,” they said.
The Center for Law and Social policy (CLASP) says, “People with higher incomes can offset rising inflation with rising incomes. Sadly, though, income inequality and rising inflation can entrap lower-income households in poverty. In addition, research has shown that prices may rise more quickly for those who have lower incomes, a phenomenon called inflation inequality.”
The effects of inflation have been felt badly by Nigerians who use social media to speak out on the rising food inflation which is affecting the purchasing power of Nigerians.
Popular Medical influencer, Aproko Doctor warned that food has become so expensive that Nigerians now buy raw food in much smaller quantities, “Food has become so expensive that people now buy pieces of yams because they can’t afford a full tuber. This is happening currently in Nigeria,” he said.
The high food inflation has also been felt with baby food as a Twitter user, @fin_disu recently noted. “Baby food prices have skyrocketed. You should think twice, thrice, and as many more times as you can before you get pregnant. NAN 1 – which is one of the cheapest – is now 2,800 per tin. For better understanding, a baby can finish it in less than a week.”
Across various markets, the complaint is not much different among both buyers and sellers.
According to the Nigerian Living Standards Survey (NLSS) report published by the NBS in 2020, The number of Nigerians that are poor have been estimated to be 82.9 million, meaning 40.1% of Nigerians are classified as poor by national standards.
The report also shows that 52.1% of rural dwellers in Nigeria are poor, while only 18.04% of urban dwellers are classified as poor. According to NBS, on average, 4 out of 10 individuals in Nigeria has real per capita expenditures below N137,430 per year, which translates to N376.5 per day.
Meanwhile, Nigeria’s unemployment rate as of the end of 2020 rose to 33.3% from 27.1% recorded as of Q2 2020, indicating that about 23,187,389 (23.2 million) Nigerians remain unemployed.
A total of 30.57 million individuals were fully employed as at Q4 2020, i.e work 40 hours and above, while 15.9 million of Nigeria’s population work between 20 and 39 hours. Also, 11.03 million individuals work between 1 and 19 hours while 12.16 million were without work in the period under review.
A combination of both the unemployment and underemployment rate for the reference period gave a figure of 56.1%.
This startling data is also related to the recent World bank data in the Nigeria Development Update revealing rising inflation has pushed an estimated 7 million Nigerians below the poverty line in 2020 alone.
The report stated that food prices accounted for over 60% of the total increase in inflation. Despite the recovery in the economy from the recession witnessed in 2020, prices are increasing rapidly and this is impacting Nigerian households, citing that Nigeria’s poor employment market poses both economic and security threats to the nation.
According to Ayobami Omole, a research analyst at Tellimer, salaries are not rising with the current prices of food because “productivity is not increasing and businesses aren’t exactly making more money.”
Kalu Aja, a financial analyst adds that Productivity in Nigeria does not support higher salaries.
Simply stated, Nigeria is not producing enough to increase earnings and growth.
The Nigerian government needs to focus on deepening economic reforms that foster productivity, tackle unemployment and drastically reduce poverty. The World Bank advised in its recent Nigeria report that Nigeria can kick-start its economic growth by reforming the power sector, citing that the present power policies of the Federal Government need to be deepened through a combination of upstream and downstream interventions.
The Lagos Chamber of Commerce and Industry (LCCI) also argues that Tackling inflation would require fixing supply-side challenges, reining in on fiscal deficit monetization. They cited that monetisation of fiscal deficit has lately become an added factor and urged that supply-side challenges including insecurity, cost of transportation and logistics, energy costs, exchange rate depreciation, illiquidity in the forex market, climate change and others should be fixed.